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HOUSING

EXPLAINED: How to get the best deal on your mortgage in Sweden

Taking out a mortgage is a big commitment not only financially, but it also ties you more closely to both Sweden and anyone you're buying the property with. Here's our complete guide to understanding a Swedish mortgage.

EXPLAINED: How to get the best deal on your mortgage in Sweden
Taking that first step on the Swedish property ladder can be daunting, so here's what you need to know about mortgages in Sweden. Photo: Fredrik Sandberg/TT

How do mortgages work in Sweden?

Your mortgage is a long-term loan allowing you to buy a property – the Swedish word is bolån, literally meaning “living loan”. Because housing prices are high, it’s usual to put down a small amount of the total cost (your deposit or kontantinsats) and borrow the rest from a bank, which you pay back in agreed instalments over several years. 

In Sweden, the first step of the process is getting a lånelöfte, literally a “loan promise”. You can do this either at the start of your house-hunt or when you’ve already got a specific property in mind that you’d like to buy.

It’s a good idea to do this early on in the process, because it can make it quicker to get the loan once you actually need the money, ensuring you don’t miss out on your dream apartment since the buying process is relatively fast-paced in Sweden. However, you should already have an idea of your budget when you apply for the lender’s note, because that will influence how much the bank will agree to lend. 

If you’ve still got questions on how the rest of the house- or apartment-hunting process works, check out our guides below first:

What do I need in order to get a mortgage in Sweden?

You’ll need a Swedish personnummer and proof of stable finances in Sweden, and you’ll be subject to a credit check. This means that you’ll usually need a history of employment and paying tax in Sweden, although some banks are more lenient than others when it comes to, for example, self-employed people or recent arrivals.

If you still have Swedish student loans to pay back, this will be taken into account when calculating your mortgage, however student loans in other countries are not usually factored in.


Photo: Fredrik Sandberg/TT

The exact amount you can borrow depends on how many of you are in the household, your income(s), what kind of employment you have (permanent is more secure), your deposit amount, any other loans you have, and how much your monthly fee (avgift) will be if you’ll be buying a property that belongs to a housing association (BRF) or the size of the home if you’ll be going for a detached house.

How can I get the best rate?

Your mortgage is very likely to be your single biggest household cost, so it’s worth shopping around to make a saving. Remember, even a small decrease in terms of percentage points could add up to thousands and thousands of kronor over time.

Using price comparison tools such as Compricer or Konsumenternas is a good start. Next, call up several of the banks which seem to offer the best deals; it’s a good idea to prepare for these calls by doing some sums beforehand, comparing the different deals on the market so you can pit them against their competitor and show them you know what you’re talking about.

Members of trade unions are offered discounts at several banks, so be sure to ask about this if you’re eligible, and some banks offer discounts on mortgage interest for certain types of homes, for example energy-efficient properties.

And there may be room to negotiate a better offer than the one offered online, especially if you set up a meeting or phone call. If you’re an existing customer at one bank but they haven’t offered the most competitive rate, it’s worth seeing if they’ll match the better rates you’ve found in exchange for you taking out your loan with them.

But watch out for offers that look attractive but come with hidden costs. For example, banks usually require that you have a current account with them in order to take out a mortgage there, so look out for any requirements such as expensive cards. Don’t forget to include any extras when calculating your monthly costs with different banks.

Make sure you know exactly how long any discount or reduced rate will apply for. Why not set a calendar reminder for this date, so you’ll be ready to renegotiate once the original offer expires? Either way, make sure you renegotiate your terms regularly so you’re confident you’re still getting the best deal.


Photo: Tomas Oneborg/SvD/TT

What do I need to know about joint mortgages?

If you’re buying with a partner, you’ll likely be sharing the mortgage. Remember that two people who live together as a couple in a shared household are given the legal status of sambo (cohabiting partners) in Sweden.

This means that any property you purchase together with the intention of sharing as a couple may be subject to 50:50 division in the event of a breakup, even if one partner paid a larger share of the deposit. Some couples choose to draw up a written contract (with assistance from a lawyer) which states what would happen if they split up.

Exactly how much do I need to pay?

When you buy a house in Sweden, you’ll usually need to pay a minimum of 15 percent of the total price as a deposit (kontantinsats), so the remaining amount will be covered by the mortgage. You’ll pay back a certain amount each month over a fixed length of time, often 25 years.

If your deposit is less than 15 percent, then your mortgage will be split into two different loans, including one that covers the cost up to 15 percent of the total price which will typically have a higher interest rate and a shorter term. 


Photo: Jessica Gow/Scanpix/TT

The rest of your mortgage might be fixed rate (bunden), where the interest rate is set for a longer time of up to ten years, or it could be variable (rörlig), which means it could change as often as every three months, depending on the interest rates at the time.

A fixed rate is usually higher to begin with, but you have the stability of knowing it won’t suddenly rise if overall interest rates go up. You can also hedge your bets by splitting between the two, so that part of your mortgage is fixed rate and the other part is variable.

If you have a variable rate, it’s usually possible to overpay the mortgage. If you’re in a stable financial position with no other loans or debts, this is worth considering in order to give yourself a buffer in case your finances change in future or interest rates rise, increasing your overall total cost.

We’ve talked about ensuring your interest rates are as low as possible by shopping around, but unlike in some countries it’s not possible in Sweden to pay only the interest each year. Since 2016, there’s a law that property owners must pay off at least two percent of the total loan each year, on top of interest, until a loan reaches at least 70 percent of the value of the property, then one percent until it reaches 50 percent. That means that if you put down a 50 percent deposit, you wouldn’t need to amortise (amortera) the loan at all.

The rule that property owners have to amortise was put on hold until August 2021 due to the coronavirus crisis, but returned in September 2021.

In any case, don’t forget that in addition to your mortgage or interest rate itself, you’ll also be paying a monthly avgift (fee) to the housing association (BRF) if your apartment or house belongs to one. This is calculated separately from the mortgage as it’s a deal between you and the BRF, not you and your bank, but don’t forget to factor it in when working out the level of mortgage you can afford.

How do taxes affect this?

Here’s the good news. Property owners in Sweden are eligible for a tax deduction which means you can reclaim 30 percent of the interest payments up to a total value of 100,000 kronor per year.

You can either get this back each month, giving you extra disposable income throughout the year (this option requires you to speak to your payroll department at work) or get it returned as part of your annual tax return.

What should I keep track of in the Swedish economy?

Sweden’s central bank (the Riksbank) has increased key interest rates in recent months, meaning that banks have raised their mortgage rates to match. This means that the days of low or no-interest mortgages may be a thing of the past.

Essentially, you will have to decide whether you are comfortable paying a variable rate, which could continue to rise, or a fixed long-term interest rate, which will fix interest at the level it is now, thereby protecting you against further unexpected rises in interest rates. However, if interest rates go down in the future, your fixed rate will stay the same.

Expert economists tend to advise against opting for a fixed interest rate on your mortgage, since a variable rate means you can take advantage of a competitive market, but it’s really a matter of preference.


Photo: Aline Lessner/imagebank.sweden.se

If you’re unsure about the best option for you, it could be worth speaking to a consumer adviser. And before you take out a mortgage, you should do some calculations to ensure you’d still be able to pay off the mortgage even if interest rates were to rise further. It’s possible to do this by playing around on an online mortgage calculator, or speaking to your bank if you’re confused.

As well as following developments in the Swedish economy, it’s just as important to keep up to date with any changes to the financial state of your BRF. Most BRFs have loans themselves, which are typically higher for more recently built apartments, and the higher the loan, the more vulnerable the BRF is to national changes in the interest rate. 

If the BRF is doing well financially (bringing in plenty of money from the avgift to cover its costs), your avgift should stay relatively low and you may even be given some months’ free rent. But if the BRF starts to struggle (for example, if costly renovations are required) your avgift could go up.

This is completely separate from your mortgage, since that’s a repayment plan directly between you and your bank, but it does affect your total monthly housing costs.

Did you find this useful? Do you have more questions? Let us know.

Member comments

  1. Any more information on deposits less than 15 %? I went to my bank last week to ask and they told me 15 % is required. Are any other banks different?

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PROPERTY

These are our readers’ top tips for buying a property in Sweden

Buying an apartment or house in Sweden can be a daunting process, but with rentals so hard to get, many foreigners end up taking the plunge. Here are the top tips from readers who have done it.

These are our readers' top tips for buying a property in Sweden

Get prepared! 

Most of the respondents to our survey stressed the importance of preparation. 

“Spend time on defining your requirements properly, including visits to different locations to narrow down your search,” advised Julian, a Brit living in Malmö. 

As well as working out your requirements, other participants argued, you should also get to grips with the way the bidding system works in Sweden, with one British woman recommending buyers “speak to professionals about the buying procedure”. One respondent went so far as to recommend hiring a buyers’ agent, something international employers sometimes provide for senior executives moving to Sweden. 

Elizabeth, a 26-year-old charity worker from South America, recommended that all buyers “learn to read a bostadsrättsförening årsredovisning”, the finance report for a cooperative housing block. (You can find The Local’s guide here.) 

Get to know the market 

Maja, an anthropologist from Hungary, said it was important to take time to get a feel for the market, suggesting buyers visit different areas to find the one that they like. 

“It will take 6-12 months easily,” she predicts. “Don’t rush. Visit the neighborhoods where you are thinking of buying.”
 
Others recommended spending time surfing Sweden’s two main housing websites, Hemnet and Booli, to get a better feel for how much different types of housing in different areas typically sell for, before starting to look seriously yourself, with one even recommending going to viewings before you have any intention of buying.  
 
“Start visiting houses and monitoring bids. That will give you a sense of the process,” recommends Shubham, 31, a software engineer from India.
 

 
Think about your expectations
 
While house prices have soared in Sweden’s cities over the past decade, the same is not the case in all rural areas, something some respondents thought buyers should take advantage of. “To buy a house at a lesser price, look at areas as far from urban areas as is possible for you and your family,” wrote Simon, a 61-year-old living in rural Sweden. 
 
Julian warned bidders against areas and types of homes that “will attract tens of ‘barnfamiljer’ (families with children), meaning “bidding wars will result”, pushing up the price. 
 
On the other hand, one respondent warned people to “avoid buying apartments in vulnerable areas, even though prices will be lower there”. 
 
An Italian buyer recommended looking at newly built apartments coming up for sale. 
 
 
Get a mortgage offer before your first serious viewing 
 
Getting a lånelöfte, literally “loan promise”, can be tricky for foreigners in Sweden, as our recent survey of banks’ policies showed. 
 
Shubham warned against applying for a loan promise from multiple banks, arguing that this can affect your credit rating if your finances are not otherwise good. He suggested using an umbrella site like Ordna Bolån and Lånekoll, although he warned that the payment they take from the ultimate mortgage provider might ultimately be taken from borrowers.  
 
READ ALSO: 
 
Get to know the estate agents, but don’t necessarily trust them 
 
Gaurav, a sales manager based in Stockholm, recommended getting to know local estate agents in the area where you are planning to buy, as they might be able to direct you towards owners who are in a hurry to sell. “Those can be the best deals as you have greater chances to avoid bidding on such properties,” he argued. 
 
Maja, from Hungary, warned, however, against believing that the estate agent is on the buyer’s side. 
 
“You cannot really make friends with them, they work for commission and they will also try to raise the selling price,” she said. “It’s how they present you to the seller that matters. Seem like a serious buyer.” 

 
Should you try to make an offer before bidding starts? 
 
Morgan, a 33-year-old marketing manager from France, said it was worth studying the kommande (coming soon) section on Hemnet and Booli to spot houses and flats before they are formally put on the market. “Be alert. Book an appointment asap and get a private visit to reduce competition. If the apartment is what you’re looking for, make a reasonable offer with a condition to sign the contract in the next 24 hours,” he recommends. “You will cut the bidding frenzy and save money.”
 
Gaurav also recommended getting a private viewing and making an offer while the property was still off the market, as did Julian. 
 
“If you are lucky, you might find owners who are in a hurry to sell,” Julian said. “Those can be the best deals as you have greater chances to avoid bidding on such properties.” 
 
But other foreigners warned against bidding before a property is publicly put up for sale on housing websites, arguing that estate agents used this as a way of getting higher prices than they would expect to get at auction.  
 
“You are essentially negotiating directly with the owner, without finding out the actual market price via bidding,” argued a 31-year-old Indian business analyst. “Usually this will work only for an apartment not in top condition.” 
 
What to watch out for in the bidding process 
 
Morgan advised buyers to take what estate agents say about rival bidders with a pinch of salt. 
 
“Estate agents will play the competition card. Don’t fall for their trick and keep a cool head. Ask yourself if it really worth it before increasing a bid,” he wrote. 
 
In Sweden, it is possible to make a hidden bid, which is not disclosed to other bidders. One Indian software developer warned that estate agents would often claim that there was such a bid to pressure you. 
 
“The hidden bids are really confusing as you don’t know the bid placed,” he said. “It’s a trap to get higher bids. “
 
A 21-year-old Romanian agreed it was important to watch out for estate agents who try to rush or panic you. 
 
“[Look out for] those that try to rush you into it by saying stuff like ‘this will be gone by Monday, the owner wants to sell fast’, or if they don’t want to include a two-week period to have the property inspected as a clause in the contract,” she said. 
 
Maja recommended choosing an estate agency that required all bidders to supply their personal number, with all bids made public, “because other agencies might cheat that price rise”. 
 
“Don’t be the first bidder,” she added. “Keep your cool, and if the agent calls or messages, just hold on. There is no official end to the bidding. Only when you sign the contract. So the best game is to seem very serious but not stupid. You have a budget, and try to sign the contract the same day or the next if you are the highest bidder.” 
 
Is now a good time to buy? 
 
The respondents were, predictably, divided. 
 
“It’s risky for both sellers and buyers,” said Carl, a Swede who recently returned home from China. “The market seems to correlate pretty well with central banks raising interest rates. If that’s the case, then it’s still a sellers’ market since central bank [Riksbank] will continue to increase interest rates until 2024.” 
 
“It’s difficult to predict anything at the moment,” agreed Gaurav. “Prices should fall a bit but that’s not happening in all the areas. Avoid buying or selling if you can for a few months.” 
 
“I see there is no difference in buying in total cost. You can get a property at a lower price but end up paying more in interest and the price is the same in five to ten years,” said one Indian software engineer. “Buying is still better than renting.”

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